Life agents need to pull up their socks, and the companies overseeing them must do a better job too, according to a new report from Ontario’s Financial Services Regulatory Authority (FSRA).
In an annual report on its compliance and enforcement efforts in the life agent sector, FSRA said it carried out 115 life agent examinations in the latest year. Of those examinations — which focused on higher-risk agents, such as agents who had received previous warnings or been disciplined by another regulator — 48% had issues meeting industry best practices.
“The top three best practices issues identified were the absence of ‘reason why’ letters, contemporaneous notes, and insurance needs analysis,” it reported.
At the same time, FSRA said its work appeared to show a link between agents who don’t follow industry best practices and those who commit regulatory violations.
“The correlation between not following best practices and [regulatory contraventions] suggests that increased oversight towards best practices would promote financial safety, support fair treatment of consumers, and facilitate principles-based and outcomes-focused regulation within the life insurance sector,” it said. “Put simply, following best practices helps to ensure fair outcomes for consumers.”
Additionally, given the link between adhering to best practices, suitability and customer outcomes, FSRA said it intends to “consult on how such practices may become requirements in Ontario in support of fair treatment of customers.”
In the meantime, it suggested that life agents “need to improve their overall business practices,” and that firms overseeing those agents need to review their compliance oversight programs.
At the same time, the agency said it’s concerned there may be underreporting of “unsuitable” life agents in Ontario, as it received just 61 complaints about agent suitability (out of approximately 60,000 agents) during the year.
FSRA closed 57% of those complaints and escalated the other 43% for review. It also said it will continue to prioritize agent suitability in its supervisory work.
According to the report, the amount of monetary penalties handed down by FSRA’s enforcement unit soared to $224,000 in the latest year from $41,000 the year before. The penalties issued by regulatory discipline officers also rose to $14,500 from $10,000 in the prior year.